Enforcement Highlights from the 2019 OSC Annual Report
October 2, 2019
The Ontario Securities Commission (OSC) recently released its 2019 OSC Annual Report (Report), which provides enforcement statistics from 2019 and discusses the OSC’s priorities for 2020.
KEY ENFORCEMENT TAKEAWAYS
The OSC has focused on discouraging “repeat offenders, fraudulent activity and other serious breaches of the Securities Act or violations of the Criminal Code” through its enforcement actions and sanctions and on “improv[ing] the efficiency and reduc[ing] the timelines of [its] enforcement efforts”, among other things. In fiscal 2019, the OSC:
- Assessed 565 cases, up from 429 in 2018
- Concluded 25 matters with C$126.4-million in administrative penalties, disgorgement orders and settlement amounts, an increase from 20 matters and C$13.7-million in 2018
- Returned C$11-million to investors through a no-contest settlement
- Commenced 39 enforcement applications before the courts, pursuant to section 127 of the Securities Act, which is up from 34 applications in 2018.
The OSC’s collection rate for fiscal 2019 was 35 per cent, down from 47 per cent in fiscal 2018, with more than C$82-million in assessed but uncollected monetary sanctions. To increase collections, the OSC is continuing its pilot program to collect unpaid monetary sanctions on a contingency basis, which brought in more than C$800,000 in previously unpaid monetary sanctions in fiscal 2019.
The OSC continues to target resources to protect vulnerable investors such as seniors and newcomers to Ontario. It has launched a seniors’ strategy that focuses on investor education and is working with the Canadian Securities Administrators to develop a regulatory framework for addressing matters related to financial exploitation and cognitive impairment. The OSC has launched publications in six languages warning of frauds and scams. Market participants can expect that, as part of these initiatives, enforcement activities will increasingly target matters involving seniors and newcomers to Ontario.
The OSC is monitoring data on complaints to the Ombudsman for Banking Services (OBSI), particularly refusals and settlements for less than recommended amounts. Following its review, the OSC will consider enabling OBSI to make binding awards against firms.
The Report touts the “innovative enforcement strategies” that the OSC is using to detect and deter misconduct. The OSC used advanced analytics tools in 18 cases and implemented a proactive case assessment framework for risk trends and targeted issues. It has entered into no-contest settlements for those who meet the required criteria and has provided the first ever financial awards to whistleblowers pursuant to the OSC’s whistleblowers’ program. The OSC provided C$7.5-million to three individuals who voluntarily provided high quality, timely, specific and credible information, which helped advance enforcement actions resulting in monetary payments to the OSC.
The Report suggests that the OSC’s enforcement efforts are proving effective in identifying the types of conduct about which it is concerned, particularly repeat offenders and fraudulent activity. Both enforcement proceedings and penalties were up in 2019. The Report highlights the successes and development of the OSC’s more recent enforcement initiatives, such as the availability of no-contest settlements and the whistleblower program. Market participants will want to be cognizant to the OSC’s increasing adoption of advanced analytics tools in its enforcement efforts, as well as its focus on seniors and newcomers to Ontario. It remains to be seen if the result of the efforts described in the Report is increased deterrence and whether the increase in enforcement action will continue in the coming year.
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